Buy Persistent Systems; target of Rs 6550: Motilal Oswal

Motilal Oswal's research report on Persistent Systems

Persistent Systems (PSYS) reported 2QFY26 revenue of USD406m (vs. est. USD404m), up 4.2% QoQ in USD terms and 4.4% in CC (est. +3.5%). EBIT margin stood at 16.3% (est. 15.7%). EBIT grew 12.7% QoQ/43.7% YoY to INR5.8b. Adj. PAT came in at INR4.7b (est. INR4.4b), up 11% QoQ/45% YoY. For 1HFY26, revenue/EBIT/PAT grew 22.7%/39.4%/42.0% YoY in INR terms. We expect revenue/EBIT/PAT to grow 22.1%/24.7%/25.5% YoY in 2HFY25. TTM TCV was USD609m, up 17% QoQ/15% YoY (1.5x book-to bill). Given its consistent execution and visibility on growth, we value PSYS at 43x Jun’27E EPS. Reiterate BUY with a TP of INR6,550.

Outlook

While our FY25/FY26 estimates remain largely unchanged. Owing to its superior earnings growth trajectory, on a PEG basis, we believe the valuation still has room for upside. We value PSYS at 43x Jun’27E EPS. Reiterate BUY with a TP of INR6,550.